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. Last Updated: 07/27/2016

Audits: ORT, RTR as Guilty as NTV

Two Audit Chamber investigations into state-controlled television giants ORT and RTR show yet again the double standard used by federal authorities in dealing with state and private media companies.

Both ORT and RTR are tax delinquents and guilty of violating the law and misappropriating tens of millions of dollars of government money, according to the summaries of the investigations, copies of which were obtained by The Moscow Times.

But while the Prosecutor General's Office relentlessly pursues its embezzlement case against Media-MOST founder (and ORT and RTR rival) Vladimir Gusinsky on the presumption that he never intended to repay a $260 million loan from state-controlled Gazprom in 1998 (the debt was settled in 1999), and while Gazprom vows to take control of NTV and its sister companies over other debts (one of which has not yet expired), in the case of RTR and ORT the Audit Chamber only "recommends" that the government "improve" its oversight.

There is, of course, a major difference here: Unlike NTV both ORT and RTR are deemed by the Audit Chamber to be "strategically important for the national information security of the Russian Federation."

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According to the chamber's reports, which totaled 75 pages, both channels are losing millions of dollars every year and, in the case of state television and radio conglomerate VGTRK's RTR, these losses are growing annually.

And both companies have violated accounting laws and underpaid their taxes, with VGTRK's delinquency occurring despite the fact that the Tax Ministry had given it, as a budgetary organization, massive tax breaks — some of which, auditors said, were illegal and must be revoked.

While Gusinsky is accused of building a "pyramid" of debts, VGTRK, which received about $100 million from the state budget in the first six months of 2000, borrowed $120 million from commercial banks during that same period — 62 percent of which it used to service old debt.

"Growing debt creates prerequisites for the company's financial instability," the Audit Chamber wrote.

In 1998, former President Boris Yeltsin ordered his Cabinet and the Central Bank to provide a one-year, $100 million loan to ORT. ORT received $40 million of that from state-owned Vneshekonombank even before the agreement had been signed and 13 percent of ORT was put up as collateral. The chamber also found that there was no clear mechanism by which the repayment of this debt was guaranteed.

And just this week Press Minister Mikhail Lesin put his stamp of approval on ORT's request to extend its debt once again, until January 2002, without penalty.

"Despite a certain improvement of advertising sales in 1999-2000, settling ORT's debt to Vneshekonombank does not appear possible today," Interfax quoted Lesin as saying in a letter to the Audit Chamber.

In the fall of 1999, it was the same Vneshekonombank that called in a $60 million loan to Media-MOST as soon as it matured, refusing to extend it.

Despite the fact that in 1998 the nation's television and radio transmission system was placed under the control of RTR's parent company, and many of these transmission centers were profitable (earning money from offering services to private broadcasters in the regions), the company's losses continued to grow, reaching $20 million during the first half of 2000 alone.

Some of VGTRK's debts that were intended for operational costs were misappropriated and spent to buy luxury cars and securities, the chamber found.

The company's relationship with its advertising agent — the Lesin-founded giant Video International — is also disparaged in the report.

An RTR official said he had an 'internal feeling' that prosecutors wouldn't visit.

After the national meltdown in 1998, VGTRK stopped receiving fixed payments from Video International. It received just $18.7 million in all of 1999 for ad revenues — about half of what is should have received, according to Obshchaya Gazeta television analyst Yelena Rykovtseva.

Auditors also said in the report that VGTRK did not monitor its advertising, which likely created ample space for theft.

"Let's be frank. If the law enforcement bodies treated VGTRK with the same standard that they apply today to Media-MOST and NTV, the company would have long ago been destroyed, its current chairman [Oleg Dobrodeyev] would be under investigation like his predecessors, and Press Minister Lesin, who has defined VGTRK's financial policy under all chairmen, would have certainly been in prison," Obshchaya Gazeta wrote in its analysis of the audit.

Media analysts said this week that financial woes began for all major media companies, state and nonstate alike, with the financial crisis of 1998, when the advertising market collapsed along with everything else. But for ORT and VGTRK — state-controlled channels that receive commercial revenues — their hybrid nature creates prerequisites for inefficiency and theft.

"The double standards are obvious," said Anna Kachkayeva, media analyst with Radio Liberty. "In any other country, such a number of violations would have generated a huge scandal. Here everything disappears as if it never existed. The Audit Chamber does not name names and does not hold people personally responsible. As long as the authorities don't want it and the situation satisfies everybody, the Prosecutor General's Office will never visit VGTRK."

Andrei Richter, director of the Media Law and Policy Center at Moscow State University, said that the government cannot afford to keep three national television channels — ORT, RTR and Kultura — but it doesn't want to part with any of them.

He also said that a double standard is obvious, but the government, while trumpeting NTV's financial wrongdoings, muffles any talk of its own channels' financial woes. "Any criticism of government TV channels will be seen as criticism of the government, which has not done enough to organize and control the work of state television," Richter said.

VGTRK officials appear to be unfazed by the audit. Dobrodeyev's assistant, Alexander Yefimovich, said that a tax police inspection that occurred after the audit found nothing.

"Our costs are growing because our fixed assets are completely worn out," Yefimovich said. "If the government does not increase funding, in a year or two we will face a real catastrophe," he said, repeating the often heard warning that national television may simply cease to exist without a major overhaul to replace aging equipment.

Asked if he feared a visit from prosecutors, RTR spokesman Alexander Goldburt said jovially: "I'm sure they won't. I have some internal feeling telling me so."

But Yefimovich was more cautious. "There is a Russian saying: Never swear that you would never end up in prison or as a beggar," he said.

"We never know on whose door prosecutors would knock tomorrow or this evening — a bag of clean underclothes should always be ready." The Struggle for Media-MOST